Brocade Communications Systems is trading in a bullish trend and several arguments are in favor of the continuation of this trend.

From a fundamental viewpoint, the company is strong. Profitability has been largely improve, net margin increased of 400%, from 2.4% in 2011 to 9.4% at the end of 2013. Moreover, the financial situation is sound as the company went from a leverage of 1.54 in 2008 to a positive cash position during the last two fiscal years. Furthermore, this dynamic is not showing any slowing signs. Thus, in 2014, net margin is expected to reach 12.4% and the company should increase its cash position of 73%. Finally, the Thomson Reuters consensus revised regularly upward EPS estimates of the company for the current year, proving the good momentum of the activity.

Technically, the security is in an uptrend on all time scales and it is supported by moving averages. During the last trading sessions, a bearish movement has brought the stock to a strong trend line. This level represents an interesting entry point has it supports the strong long term bullish movement of the stock. This trend should allow the stock to reach its USD 10.84 long term resistance.

Therefore, taking into account the strong fundamentals and technical patterns; it seems opportune to take a long position at the current price in order to benefit from a possible reversal. The first target price is the USD 10.84 resistance. A stop loss will be placed under the USD 9.8, corresponding to the 50-day moving average.